Prof. Ronald Colombo Quoted in Law360 Article

Even with more than 15 years of experience in the two biggest courts for securities litigation, and her resulting stack of decisions in that area, Judge Sonia Sotomayor’s approach to securities law cases defies easy characterization, according to analysts.

President Barack Obama’s nominee to the U.S. Supreme Court, Judge Sotomayor has served on the U.S. Court of Appeals for the Second Circuit since October 1998, nominated by former President Bill Clinton.

Prior to that, she was a judge in the U.S. District Court for the Southern District of New York, nominated in 1992 by former President George H.W. Bush.

But the years Judge Sotomayor has spent in two courts that are hotbeds for securities litigation haven’t exposed a clear bent in one direction or another, experts say.

“If you actually go through all of her securities opinions from both the district court level and the appellate court level, what you see is a theme, in that there is no theme,” said Elizabeth Nowicki, a law professor at Tulane University Law School in New Orleans.

“On the Second Circuit, there are some judges when they get a securities case, you can predict the result. Maybe if you couldn’t predict the result, you could at least gauge the odds. With her, you really can’t,” Nowicki said.

Court watchers who follow securities cases say Judge Sotomayor tends to carefully and often narrowly apply the relevant law to a particular set of facts, rather than pursue a particular ideology.

In addition, her decisions do not point to a particularly pro-plaintiff or pro-defense leaning in securities class actions, analysts say.

Ronald J. Colombo, corporate and securities law professor at Hofstra University School of Law, described Judge Sotomayor’s collection of opinions in the securities arena as “nuts and bolts” securities law decisions.

“I have to say, and this doesn’t make for the most exciting headlines, but I found them unremarkable in a good way, insofar as they were straightforward, reasonable, comprehensive opinions,” Colombo said. “Especially in this narrow area of the law, I don’t see her pushing any particular agenda.”

Many court watchers point to a decision she penned in 2005 in Dabit v. Merrill Lynch Pierce Fenner & Smith as characteristic of her strategy, in spite of the fact that the Supreme Court later overturned the ruling.

In Dabit, the Second Circuit ruled that a state law class action filed by a securities broker was not preempted by the Securities Litigation Uniform Standards Act of 1998.

Judge Sotomayor wrote that SLUSA precluded cases involving the purchase or sale of securities but that the law did not reach cases such as the Dabit suit, which involved allegations that the investment firm’s actions improperly convinced stockholders to hold on to their securities, not buy them or sell them.

The Supreme Court, somewhat dramatically, overturned that decision in an 8-0 ruling in 2006, finding that policy concerns made it appropriate to read SLUSA more broadly so that it also preempted suits from those who held on to stock.

While having a decision overturned in an 8-0 ruling could seem to be a definitive rejection of Judge Sotomayor’s reasoning, many legal analysts have criticized the Supreme Court’s decision in that case, or at least conceded that reasonable people could easily differ over the proper interpretation of SLUSA, which is widely perceived as a poorly drafted statute.

“What she did was take a very strict view of the statute,” said Elena Marty-Nelson, a law professor at Nova Southeastern University Law Center.

Had someone with Judge Sotomayor’s grounding in securities litigation been on the Supreme Court when it was considering the Dabit case, the decision may well have come out differently, Nowicki said.

“I think she understood the statute and its application in a much better way than the Supreme Court,” she said. “I think if she were involved in the post-argument discussions in this case, I think she could have served a very valuable purpose, not to dissuade, but to discuss the issues and nuances and the legislative history.”

Another potentially telling decision Judge Sotomayor was involved in was handed down by the Second Circuit in 2006 in In re: IPO Securities Litigation.

In that case, the appeals court articulated a stricter standard for class certification. Judge Sotomayor did not author that decision, but she signed on to it.

In addition, the ruling essentially overruled a class certification standard Judge Sotomayor herself had articulated years earlier in a 2001 decision in a massive antitrust action brought by retailers against Visa Inc. and MasterCard Inc. in In re: Visa Check/MasterMoney Antitrust Litigation.

“She’s not purely an ideologue. She has shown by her agreement to that decision a pragmatic approach to the law and one that is changeable over time,” said Paul G. Karlsgodt, a litigation partner at Baker & Hostetler LLP who focuses on class action defense.

Still, other analysts have wondered whether her straightforward approach in securities law cases implies a lack of interest.

“I don’t really view her as being a strong voice in that area. Obviously she has sat on some important cases,” said Jill E. Fisch, a professor at the University of Pennsylvania Law School. “I tend to think of other Southern District of New York and Second Circuit judges as having more of a passion for securities law than Judge Sotomayor.”

And for judges fascinated by securities law, the Second Circuit and the Southern District of New York are courts where that type of passion would make a strong impression.

“Sitting in New York, it’s the financial center of the world. If you have an interest in those cases, if you have a passion for business law, there’s an opportunity to engage,” Fisch said. “And in many ways, the Second Circuit has been more influential than the Supreme Court over the years in deciding important business law issues.”

Still, if Judge Sotomayor is confirmed by the Senate, as expected, she may well be in a position to put her experience in two key venues for securities litigation to quick use.

The Supreme Court already has a few securities cases waiting. In May, the high court agreed to take up a case challenging the Sarbanes-Oxley Act and the constitutionality of the Public Company Accounting Oversight Board established by the 2002 law.

Also in May, the high court agreed to weigh in on a securities class action stemming from the long-running saga over Merck & Co.’s recalled painkiller Vioxx.

The high court will consider the pharmaceutical giant’s argument that the action should be dismissed because investors waited too long to file it.

Another case set to be heard next term, Jerry Jones et al. v. Harris Associates LP, involves allegations that a mutual fund manager charged excessive fees in violation of the Investment Company Act.

Judge Sotomayor’s experience in dealing with securities law cases may have some effect on her colleagues at the Supreme Court, Marty-Nelson reasoned.

“I think the fact that she has a lot of experience in so many of these cases, it might very well sway others to at least listen to her views on these things,” she said.

But more broadly, the Supreme Court is likely to soon be called on to tackle some of the many legal quandaries likely to arise out of the financial crisis, and the government’s reactions to it in the form of modified securities and financial regulations, Nowicki said.

“Now, if what we believe about Sotomayor is true, that she’s got some specific expertise from the Second Circuit, now’s the time for her to add value at the Supreme Court,” she said.

And if Judge Sotomayor joins the Supreme Court as expected, attorneys arguing securities cases and looking to sway Judge Sotomayor should expect her to be fairly restrained, Fisch said.

“I think she’s going to try to reach the technically correct outcome. I wouldn’t try to move her with broad policy arguments. And I would view her as resistant to judicial activism in this area,” she said.